On January 17, Indiana introduced Senate Bill 269 that, if enacted, would add click-through and affiliation provisions to the sales and use tax laws. In addition, the proposed legislation specifically includes nexus for a fulfillment center (IC 6-2.5-3-1(c)(3)). Indiana’s proposed legislation is very similar to Tennessee’s in that both appear to be responses to the lost sales tax revenue from Amazon. Amazon’s footprint in Indiana is quite large, with four fulfillment centers located in the state.
Under the click-through provisions, a retail merchant is presumed to have click-through nexus if it enters into an agreement with a resident of Indiana, or directly or indirectly refers potential purchasers to the retail merchant. The referral can be via an internet link, website or other means.
Under the affiliate provision, a retail merchant is presumed to have affiliate nexus if it has an affiliate (as defined in 26 U.S.C. 1563(a)) in Indiana and has substantial nexus. Similar to other states, Indiana’s substantial nexus is determined by similar product lines or similar/substantially similar trade and service marks. In addition, Indiana has an additional proposed nexus factor– substantial nexus may also be established if the affiliate uses its Indiana employees or its Indiana facilities to advertise, promote or facilitate sales.
The presumption of nexus, however, may be rebutted in either case by submitting evidence that the Indiana resident with the agreement did not engage in any activities that was significantly associated with the retail merchant’s ability to establish or maintain a market.
If enacted, the legislation provides for a transition period. If an agreement is entered into, payment for property or delivery of property occurs after June 30, 2014, this legislation would be effective July 1, 2014. However, if any of the transactions just delineated occur before June 30, 2014, legislation would be effective January 1, 2016.
Stay tuned for updates as the bill progresses through Indiana’s legislature.